Don’t Panic & Other Perspectives
I thought it would be a good time to check-in and provide some perspective. Yes, the market is not fun right now. It's something we haven't seen in a long time. In fact, the 1930s was the last time we started a year like this. However, we will focus on the positive and the big picture. I think the below charts are beneficial. Over 95 years, we have a 74% chance of having a positive return. Here is a glimpse of the forest from the trees:
Now, that being said, what has your advisor done to prevent you from declining as much as the market?
Buffered Index
The value of this tracks the market. Still, there is actually no change in value until the maturity date. At that time, you will be reimbursed for a certain percentage of the loss. So when looking at your account, think, "I have 25% approximately allocated to an investment with reimbursement for loss.” It will not look like that on the face of it.
Inflation Alternatives
Many of you will see these, such as precious metals and an inflation allocation basket investment. These move opposite of rising inflation. These inflation hedges make up approximately 10% of each portfolio. They contain metals, mining, energy, commodities, apartment buildings, and other traditional hedges on inflation.
Fixed Index Annuities and Indexed Universal Life policies
Many of you have these investments, and the intent was to be a bond alternative. Bonds are taking losses similar to stocks this year and are not a place to hide. However, FIAs and IULs have no risk and track market indexes. So if we had a year like 1931, there would be no loss.
Value Investing
Most, if not all of you have a strong slant towards value/blue-chip companies. These are cash-flowing companies that, as consumers spend less, these companies produce our essentials. All we hear about in the news is the price of things going up and people being able to afford less. It's simple, we buy fewer extras like tech, streaming, etc., and spend our money on essentials. We want to hold these kinds of companies and do. Growth and tech will have their day again, and we'll be looking to take advantage of that someday when the price is right. Now is not the time.
Because of all the strategies I just listed, 2022 client reviews have been overwhelmingly positive compared to this year's market losses. With that being said, what are things to take advantage of in a time like this?
If the Fixed Index Annuities and Indexed Universal Life policies above are attractive to you, let's talk. I'll explain how to explore no-risk investments with 10-year track records of 6% with many insurance-type benefits. I invested in one this year, and it's become a large part of my practice.
Roth Conversions! When your IRA portfolio is down, what a great time to convert IRA dollars to Roth IRA dollars! Roth IRA dollars grow tax-free for the rest of your life and are tax-free when you take them out. The only catch is you pay income tax now. Reach out to me, and we can find the appropriate amount you are willing to do within your tax bracket. We don't know what tax brackets will be like in 2026, when they are scheduled to increase. So it makes sense to prepare for that by Roth converting now.
I want you to know I value your business and am taking the utmost care with all of your accounts. I am incredibly confident in our position going forward, and you should be too. Steep drops are followed by steep recoveries; it may just take a while. So revisit the charts above regularly when doubt inevitably creeps in.
“Invest for the long haul. Don’t get too greedy and don’t get too scared.”
